UPDATE 2.20pm: Excelsior Gold says it has secured a long term milling allocation at Norton Gold Fields' Paddington mill north of Kalgoorlie.
The company says the agreement will lower the capital costs and timeframe for development of its flagship Kalgoorlie North gold project, just 20km away from the Paddington mill.
Under the terms of the deal, Excelsior will be able to utilise 500,000 tonnes of milling capacity a year for five years with options to extend on a yearly basis for another five years.
In exchange, Excelsior will contribute as much as $12.5 million to upgrade and refurbish the mill.
Payment for milling will be based on an open book, cost plus structure.
Excelsior will be responsible for mining it ore, with Norton responsible for transporting and treating the ore.
"The agreement will allow Excelsior to progress the project towards production and operating cashflow for a significantly lower capital cost and in a faster timeframe than if a standalone development was pursued," Excelsior said in a statement.
The Kalgoorlie North gold project hosts a resource of 23.67 million tonnes at 1.80 grams per tonne gold for 1.4 ounces of gold, with further upside potential.
"Mining operations are expected to initially commence from the Zoroastrian deposit, with first treatment expected in early 2016," Excelsior said.
Shares in Excelsior closed up 0.9 cents, or 12.68 per cent, at eight cents.